Wells Fargo Set to Fail Key Bank Regulatory Test

A U.S. bank regulator is ready to fail Wells Fargo on a national scorecard for community lending, sources familiar with the decision said on Wednesday, in a move that could limit near-term expansion for the bank.

Wells Fargo wfcis due to be deemed a bank that “needs to improve” under the Community Reinvestment Act (CRA), a law meant to promote lending to poor neighborhoods.

The move is a two-notch downgrade from the “outstanding” tag Wells Fargo has held since 2008 and the change would give regulators a greater say on day-to-day matters like opening new branches.

Bank of Americabac lost its “outstanding” grade in 2011 when the OCC faulted the lender for “discriminatory or other illegal credit practices.” J.P. Morgan Chase jpm also slipped one notch from “outstanding” to “satisfactory” in 2013.

But industry and regulatory sources said they knew of no other case where a national bank had slipped two notches in a single review of CRA compliance.

Wells Fargo’s Phony Account Scandal May Not Actually End Up Costing That Much

Wells Fargo’s massive phony account scandal has cost the bank months of bad publicity, and its CEO. But the actual cost of those 2 million fake accounts may be a lot less than expected, at least according to the bank’s CEO.

Wells Fargo’s new CEO Tim Sloan said Tuesday that the bank may end up paying tens of million of dollars in investigations and other regulatory matters in order to resolve issues from the scandal. That’s far less than earlier estimates. In November, for example, the bank upped its potential legal costs by $700 million. Now it looks like the additional costs from scandal will be in the eight figure range, and not deep into the nine figures.

“I think that seems reasonable today based on what we know,” Sloan said at the Goldman Sachs financial-services conference on Tuesday of the eight figure estimate. “It’s the upper end of our range from an efficiency standpoint.”

Another sign that the scandal, in which bank salespeople opened 2 million phone accounts over more than five years, shares of Wells Fargowfc have already completely recovered, and are now trading 10% above where they were before the scandal broke.

Wells Fargo is far from out of the woods. The bank is currently under investigations by the Department of Justice, the Securities and Exchange Commission, and other state agencies over the bank’s sales practice disclosures. Wells Fargo’s board has its own investigation into the bank’s retail sales practices that was started in late September and has not been released yet. The bank also reportedly hired “many dozens” of lawyers form Shearman and Sterling to help it correct its sales practices and defend the bank against litigation. Sloan also said at the Goldman Sachs conference that he had received two regulatory consent orders to hire a consultant to examine the bank’s retail business.

“Should other regulators such as the SEC push hard, settlement of additional regulatory matters could be in the hundreds of millions of dollars as well. Once you add in employee and customer litigation, those costs could escalate dramatically,” wrote William Jacobson, a clinical professor of law and director of the Securities Law Clinic at Cornell University. “So putting Wells Fargo’s total additional risk in the tens of millions of dollars seems optimistic.”

Still, Wells Fargo, at least for now, seems to think that it won’t have to put its hand too much farther into its own pocket, or really its investors, to put the scandal behind it. The bank has already paid some $185 million in fines to the Consumer Financial Protection Bureau and the city of Los Angeles. And, as the stock rebound shows, much of which happened after Trump was elected, investors are betting that the president-elect is will be friendly to financial stocks. Shares of Wells Fargo have gained 22% since election night, while an the Keefe Bruyette and Woods Bank Index has risen less—15% in the same period.

Wells Fargo Offers to Meet with Standing Rock Sioux Before Year-End

Wells Fargo & Co said it would “be pleased” to meet with tribal elders from the Standing Rock Sioux tribe before year-end to discuss the U.S. bank’s investment in the Dakota Access Pipeline, the company told the tribe in a letter dated Thursday.

A Wells Fargo spokesman confirmed the authenticity of the letter, and pictures of the document appeared on Twitter on Friday. In a statement, a spokesman added that the company has met with the Standing Rock tribe several times, most recently in October.

Wells Fargo is one of more than a dozen financial institutions with investments in the pipeline; others include Citigroup Inc and TD Bank. Activists have protested outside bank headquarters and branches in recent months to try to persuade the company to divest its investment in the line.

Now Elizabeth Warren Is Slamming Wells Fargo Over Its Arbitration Rules

Massachusetts Democratic Senator Elizabeth Warren on Monday criticized Wells Fargo & Co’s decision to require customers affected by its unauthorized accounts scandal to go through arbitration rather than allowing them to sue.

The San Francisco-based bank last week asked a U.S. court to uphold contract clauses that mandate arbitration, something financial firms often use to protect against litigation. Wells Fargo’s situation is unusual, though, because it opened accounts without customers’ permission, calling into question whether the contracts and their clauses are legitimate.

In a Facebook post on Monday, Warren, a frequent critic of the banking industry, said Wells Fargo’s promise to treat customers better in light of the scandal is “meaningless” as long as it is pursuing arbitration.

“After dozens of Wells Fargo customers sued the bank to recover fees they were charged from these fake accounts, Wells Fargo tried to boot the claims from court and into the closed-door, industry-friendly arbitration process,” Warren said.

“Unfortunately, there’s a real chance a court will let Wells Fargo shuffle these claims off to die in arbitration.”

A Wells Fargo wfc spokesman said the bank has an arbitration clause in its customer account agreements.

“In cases where customers have received a product that they did not want or authorize related to our recently-announced settlements, we are providing free mediation through an impartial third-party,” the spokesman said.

Last year, the bank successfully argued in another lawsuit that arbitration agreements customers signed when opening legitimate accounts extended to the unauthorized ones.

Warren also used her Facebook post to advocate for a rule proposed by the Consumer Financial Protection Bureau that would eliminate mandatory arbitration.

Before being elected to Congress, Warren was a vocal proponent of such an agency being created as part of the 2010 Dodd-Frank financial reform law. Some Republican lawmakers in newly powerful positions following the 2016 elections have pledged to eliminate it.

Here’s Why Wells Fargo Employees Are Suing Over Retirement Plans

Wells Fargo faces a new U.S. lawsuit claiming that it funneled more than $3 billion of employee retirement savings into expensive, underperforming proprietary mutual funds to enrich itself.

The proposed class-action lawsuit, filed on Tuesday in federal court in Minnesota, accused the third-largest U.S. bank of “self-dealing and imprudent investing” by steering 401(k)contributions to its Wells Fargo Dow Jones Target Date funds.

The lawsuit, filed by employees led by John Meiners, from St. Louis, seeks to recoup excess fees and unrealized profits stemming from Wells Fargo’s alleged breach of fiduciary duties to all 401(k) participants over the last six years, the complaint said.

Wells Fargo already faces many lawsuits over its opening of unauthorized customer accounts, in a scandal that led to last month’s departure of the San Francisco-based bank’s longtime chief executive, John Stumpf.

Target date funds, also known as lifecycle funds, blend mutual funds that invest in stocks, bonds, and cash, shifting the mix based on investors’ expected retirement dates.

According to the complaint, Wells Fargo’s target date funds cost 2.5 times more than similar funds from such rivals as Fidelity Investments and Vanguard Group.

In the complaint, Meiners said the difference reflected the layering of an extra set of fees to run the funds, on top of fees to manage the underlying indexed funds.

Despite this, assets allegedly grew in part because Wells Fargo made its target date funds a default investment option, and provided an “easy” and “quick” enrollment feature.

Wells Fargo Asks Court to Dismiss Account Scandal Lawsuit

Wells Fargo has asked a U.S. court to order dozens of customers who are suing the bank over the opening of unauthorized accounts to resolve their disputes in private arbitrations instead of court, according to legal documents.

The motion, filed in the U.S. District Court in Utah on Wednesday, is in response to the first class action lawsuit filed against Wells since it agreed to pay $185 million in penalties and $5 million to customers for opening up to 2 million deposit and credit-card accounts in their names without their permission.

The scandal has shaken Wells, the third-largest U.S. bank by assets. Its former Chief Executive Officer John Stumpf stepped down amid the furor, it has been put under tougher regulatory scrutiny and its reputation has been damaged as it faces multiple probes.

The move to enforce the mandatory arbitration clauses comes as Wells Fargo has launched an advertising campaign to win back customer loyalty in the wake of the scandal.

No one from Wells Fargo was immediately available to comment on the filing.

Mandating arbitration when signing up for financial products has become standard practice after a 2011 U.S. Supreme Court decision validated the practice. But customer advocates say it improperly denies customers the legal protections of court proceedings, such as the right to appeal, and helps to conceal corporate misconduct from the public and regulators because documents and hearings are not made public.

Customers trying to recover small sums of money are also unlikely to find lawyers to represent them in arbitration, critics say, and the cases do not set a legal precedent to help other affected individuals.

Last year, a court dismissed an earlier lawsuit against Wells Fargo wfc, saying that customers had signed arbitration clauses when opening their accounts.

The bank has come under fire over its mandatory arbitration clauses from Democratic lawmakers in Congress, including Senator Elizabeth Warren of Massachusetts.

The Consumer Financial Protection Bureau, a brainchild of Warren, is considering rules to ban banks, credit card issuers and other companies from forcing customers to submit to arbitration and waive their right to join class action lawsuits.

But the CFPB could find its powers scaled back by President-elect Donald Trump and a Republican-led Congress, according to members of both political parties, lobbyists, and lawyers.

These Senators Want to Cancel Wells Fargo Execs’ ‘Golden Parachutes’

The U.S. government should go after payouts to former Wells Fargo executives involved in a scandal over unauthorized accounts now that a federal regulator has said it has the power to do so, lawmakers said on Monday.

The San Francisco-based bank reached a $190 million settlement with federal regulators after admitting employees opened as many as 2 million accounts without customer consent.

That September deal allowed Wells Fargo wfc to make “golden parachute” payments to departing executives. But on Friday, the Office of the Comptroller of the Currency, which oversees many federal banks, voided those terms.

On Monday, two leading Democratic lawmakers urged the OCC to move ahead and revoke compensation to relevant executives.

“Bank executives shouldn’t get golden parachutes while employees making $12 an hour get shown the door,” U.S. Senator Sherrod Brown of Ohio told Reuters in a statement.

Brown, the most senior Democrat on the Senate Banking Committee, has said Wells Fargo scapegoated low-paid tellers in the scandal while bank bosses escaped blame. Wells Fargo fired 5,300 workers over the course of five years that the fraud persisted.

“The OCC and all federal watchdogs shouldn’t give banks that cheat a free pass,” he said.

U.S. Senator Mark Warner of Virginia also urged the regulator to go after former executives with all its authority.

“I am encouraged that the OCC has now positioned itself to take appropriate action, and I would strongly urge them to do so,” he told Reuters in a statement.

On Saturday, Wells Fargo’s chief executive, Tim Sloan, wrote employees that the bank would “comply with the revised requirements and continue to cooperate with the OCC.”

A Wells Fargo spokesman cited that memo when asked for comment on Monday.

Last week’s move was a reversal for the OCC, which had stopped short of imposing the toughest controls on executive payouts in its original settlement with Wells Fargo.

The San Francisco-based bank “is not subject to the limitation on golden parachute and indemnification payment,” according to the September accord.

On Friday, the OCC said that it had “revoked” that earlier exemption for Wells Fargo, allowing it to keep a check on executive payouts, new bank leaders and other controls.

An OCC official declined to say what steps the regulator would take next. The agency also declined to say why it had initially offered Wells Fargo an exemption or what prompted the reversal.

The regulator often waives its authority over “golden parachutes.”

In 2014, for instance, the OCC sanctioned Bank of Americabac and Citibank but exempted the lenders from those controls, according to a Reuters review of enforcement paperwork.

Following the settlement, lawmakers held hearings where they grilled then-CEO John Stumpf about Wells Fargo’s sales practices and corporate culture. He resigned in October.

Stumpf and Carrie Tolstedt, the former head of retail banking, relinquished about $60 million in stock compensation in the aftermath of the scandal. But the pair also stood to take home more than $350 million in compensation, according to a Reuters review of filings.

Stumpf and Tolstedt could not be immediately reached for comment.

Wells Fargo has said that it might try to recoup some of Tolstedt’s compensation—but only after the firm has completed an internal investigation.

Here’s What a Regulator Is Now Saying About Wells Fargo

A leading U.S. bank regulator on Friday reversed course and positioned the agency to claw back pay of former executives at Wells Fargo & Co wfc after a phony-accounts scandal.

The lender must also now seek prior approval before naming new bank leadership, said the Office of the Comptroller of the Currency, the main regulator for federal banks.

Friday’s move may target executive pay at Wells Fargo at a time when some lawmakers complain bank bosses have not paid a fair price for their part in financial scandals.

Wells Fargo in September agreed to pay $190 million to settle charges that bank employees opened as many as 2 million accounts without customers’ knowledge.

The fraud went on for at least five years, said the San Francisco-based bank that fired 5,300 employees involved.

Congressional hearings followed news of the scandal and John Stumpf, the firm’s chief executive officer, resigned.

Meanwhile, the September settlement with Wells Fargo remained relatively lax.

The OCC exempted Wells Fargo from some controls on “golden parachutes” in that agreement. The move Friday evening voids those earlier allowances and puts Wells Fargo under toughened standards for oversight, the OCC said.

“The OCC informed the Bank today that it has revoked… relief from specific requirements and limitations regarding rules, policies, and procedures for corporate activities,” the agency said in a Friday evening statement.

A Wells Fargo official said on Friday that the bank is on track to restore its reputation and business.

Stumpf and Carrie Tolstedt, former head of retail banking, did relinquish about $60 million in stock, in the wake of the scandal, according to a Reuters review of securities filings.

But the pair also stood to take home more than $350 million in compensation, according to filings.

NEW TERMS

Friday’s move is an about-face for the OCC which had settled the Wells Fargo matter without imposing the toughest controls on executive payouts.

Wells Fargo “is not subject to the limitation on golden parachute and indemnification payment,” according to the September settlement.

That allowance on executive pay appears in an eight-page stipulation that also exempts the bank from “requiring OCC approval of a change in directors and senior executive officers.”

If the OCC has asserted its right to screen Wells Fargo executives it could have asked that incoming executives satisfy tests of “experience, character or integrity,” according to banking rules.

Regulators gained the right to freeze executive payouts at troubled banks after the savings and loan crisis of the 1980s and 1990s but exemptions are common.

The OCC has granted an exemption on “golden parachute” standards roughly half the times it issued cease-and-desist orders this year, according to a Reuters tally.

ANSWERS LAWMAKERS

In Congress, lawmakers on Friday urged Wells Fargo to come clean about the scope of the phony-accounts scandal.

Democrats on the Senate Banking Committee had asked Wells Fargo to share emails, memos and meeting minutes from the bank’s inner workings but the firm largely declined.

On Friday, those lawmakers published Wells Fargo’s response to dozens of questions about the scandal which the bank said it was still investigating.

Sherrod Brown of Ohio said he was not satisfied by the reply from Wells Fargo. Wells Fargo did tell lawmakers that in 2012 there was an internal probe over problematic sales practices included examining whether accounts were “a poor fit for the customer.”

The settlement covered only accounts that may have been opened without customer authorization. It did not address accounts that were authorized but might have been a poor fit.

“It seems unlikely that Wells Fargo can restore the trust of its customers if it continues to ignore or dodge basic questions about the causes and consequences of the fraud that it permitted for years,” Brown said in the statement.

Wells Fargo Account Openings Have Tanked 44%

In a bid to prove its trustworthiness, scandal-ridden banking giant Wells Fargo has published how many accounts it opened in October—and it wasn’t pretty.

On Thursday, the consumer banking titan, once known for its spectacular cross-selling record, revealed that account openings fell off a cliff last month. Checking account openings fell 44% since the same month a year earlier and 27% from a month ago, while new credit card applications also fell off 50% from the same month a year earlier and 35% from a months ago.

“As expected, we continued to see declines in new account openings,” CEO Tim Sloan said in a statement.

The drop off in October accounts seems to indicate that Wells Fargo is no longer cross selling—though its unclear to what extent the decrease in account openings resulted from Wells Fargo’s flailing reputation, or from the company’s decision to stop cross selling. At the very least, the results show that Wells Fargo is not getting away from the fraud easy.

Famed investor Warren Buffett also reiterated his continued support for the bank earlier this month, telling CNN that “it takes time to restore trust.”

The monthly update, which the company pledged to release starting in the third quarter, comes as part of a larger push to increase transparency and regain consumer and stakeholder confidence.

Meanwhile, deposits in checking accounts continued to grow 7%, while credit card balances also rose 9%. Wells Fargo does not expect the lower account openings to impact revenue.

Investors also took the news in stride, as Well’s Fargo’s stock continued its climb, closing up 1.5% Thursday. Since Donald Trump was elected president, the company’s stock, along with those of banks, has completely erased its losses from the fake accounts scandal as shareholders anticipate fewer regulations on banks and higher bond yields (and therefore higher profits for banks) under the businessman’s leadership.

Still, the bank did lose 3% of its existing checking account customers in October.

After news of its phony accounts scandal broke in August, Wells Fargo’s stock got a long drag through the mud. But with expectations of a presidency that will be much friendlier to the financial industry, investors are finally beginning to show a little forgiveness.

The jump in bank stocks comes as markets absorbed the surprise of Trump’s win—most on Wall Street had anticipated Hillary Clinton would take the White House, leading to further restrictions on Wall Street. Conversely, Trump has promised to dismantle the Dodd-Frank financial reform law enacted after the financial crisis and pull back Department of Labor fiduciary rules that require those who give retirement advice to act in their client’s best interest.

“We think the main result of Donald Trump’s election will be that Trump will be able to appoint regulators who are more industry friendly than regulators appointed by President Obama,” Brian Gardner, head of Washington research at Keefe Bruyette and Woods, wrote in a Wednesday vote. “The regulatory implications are more important than what might come out of Congress but are broadly positive for financials in our view.”

Wells Fargo could still face another $1.7 billion in legal fees as a result of ongoing litigation from opening the deposit and credit card accounts between 2011 and 2015.